March 18, 2010 / 2:29 PM / 10 years ago

UPDATE 4-Pentagon says EADS may yet pursue tanker deal

* Pentagon welcomes possible EADS bid

* Would consider “reasonable extension” of bid timetable

* EADS CEO says bid impossible under current schedule (Recasts with Pentagon statement)

By Jim Wolf

WASHINGTON, March 18 (Reuters) - The Pentagon said Europe’s EADS EAD.PA has expressed possible interest in continuing to vie for a multibillion-dollar contract for aerial refueling aircraft despite the end of a trans-Atlantic partnership it had formed to bid.

The Defense Department welcomed the interest and would consider making a “reasonable extension” to a May 10 deadline for bids if necessary, said Geoff Morrell, the Pentagon press secretary, in an emailed statement on Thursday.

Absent a bid involving Airbus parent EADS, rival Boeing Co (BA.N) is poised to pocket a long-delayed contract to build an initial 179 tanker planes potentially worth up to $50 billion. Also at stake is EADS’ drive to further penetrate the United States, the world’s most lucrative military market.

EADS Chief Executive Louis Gallois told reporters earlier on Thursday that the company would find it nearly impossible to meet the current deadline now that Northrop Grumman Corp (NOC.N) had dropped out.

“In the present time frame, I could say it’s almost impossible,” he told reporters in New York. “In the present time frame — 60 days — impossible.”

Gallois said EADS had not been approached by other potential partners, nor had it reached out to any yet.

Last week, Northrop opted to forego a bid. It said the specifications unfairly favored Boeing’s smaller, 767-based tanker over the Airbus A330 airframe that EADS has pitched.

Northrop’s exit prompted charges of U.S. protectionism from some European leaders, raising the prospect of retaliation against U.S. arms makers.

In response, the Pentagon’s top arms buyer, Ashton Carter, told reporters Friday: “We value the contribution of the European industry to the choices we can make as a a department. There is no protectionism going on.”

Morrell said the Pentagon was inviting proposals from all qualified contractors for the tankers “consistent with our commitment to conduct a fair and open competition.”

“The Department has received notification from EADS North America indicating possible interest in competing for the Air Force’s KC-X Tanker and we would welcome that,” he said.

A spokesman for EADS’ North American arm, Guy Hicks, had no immediate comment on the Pentagon’s account of EADS’ indication of possible continued interest.

This is the U.S. Air Force’s third attempt since 2001 to start replacing its fleet of KC-135 tankers, which are nearly 50 years old on average. The first effort failed amid an ethics scandal that sent two Boeing employees to prison for conflict of interest, one of them a former top Air Force arms buyer.

In February 2008, EADS and Northrop won the contract, only to have it canceled after the U.S. Government Accountability Office found the Air Force had failed to follow its own rules in judging the bids.


Without the tanker bid, EADS might have to make its 2020 performance projections for the United States “less ambitious” but would still heavily emphasize U.S. expansion, Gallois told reporters.

Last week, EADS North America Chief Executive Sean O’Keefe told Reuters that the European company still hoped to boost U.S. revenue to $10 billion by 2020.

“Without the tanker, perhaps we could adapt these figures,” Gallois said.

He added that EADS had no new targets as of yet and said if the company had to change its projections, it would announce them in coming months. (Reporting by Jim Wolf; Additional reporting by Deepa Seetharaman in New York, Phil Stewart in Washington and Tim Hepher in Mexico City; Editing by Gerald E. McCormick and Tim Dobbyn)

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